Cost of Debt

Cost of debt refers to the effective interest rate a company pays when borrowing money, such as loans or bonds. It includes the interest expenses and any fees associated with borrowing. This cost is important because it impacts the company's profitability and how much it pays to finance its operations. Essentially, it represents the price a business pays for using borrowed funds, and a lower cost of debt can make borrowing more attractive, while a higher cost indicates more expensive financing. It’s often expressed as a percentage, helping investors understand the company's expense for debt management.